A year-end wealth planning guide

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As we approach the end of the year, you may want to review areas that may impact your wealth and estate planning next year. In this year-end planning guide, we examine four critical areas to consider that may affect your finances:

1. Generational wealth transfer

Generational wealth transfer may become more important when an event occurs, such as a death, a marriage, or the birth of a new family member. However, it's essential to plan for generational wealth transfer by ensuring all these crucial actions have been completed:

  • Established a Trust document- If you don't have a trust document, your family may need to go through probate, a tedious court process to transfer your assets retroactively, which can be expensive and public.
  • Updated beneficiary information- Consistently check the beneficiaries listed on your legal documents, retirement savings, and insurance plans, as these designations can outweigh what is in a will. Life transitions that may impact a change in beneficiaries include divorce, the birth of a new child, the loss of a loved one, a marriage, etc.
  • Established directives- Review all legal directives such as power of attorney documents, medical care directives, and your trust document to ensure all information is up to date in case the relationship with the named individual(s) changes.
  • Completed an inventory of assets- Periodically update inventory assets listed in your trust documents, such as real estate, collectibles, vehicles, etc., and intangible assets, such as savings accounts, life insurance policies, retirement plans, ownership in a company, and more.
  • Drafted, reviewed, or updated a last will- It is important that your last will details your wishes regarding the distribution of your property, money, and assets that aren't in your trust document. Remember to update your will as your financial and family situation changes.

2. Minimizing taxes

Building wealth and planning for taxes are essential and often require the help of financial, tax, and legal professionals. For some, tax policies can impact how much taxes to pay domestically and abroad when living or working in a foreign country, or if they own companies in a foreign country. Consider these taxes that may impact your tax situation:

  • Income tax- Income tax is a source of revenue that governments impose on businesses and individuals within their jurisdiction. If you work or own a business in a foreign country, you may need to file taxes in more than one country. For this reason, you must consult a tax professional in each country for the latest tax laws.
  • Estate tax and gift tax-The IRS limits the valuation of assets that can pass to heirs' estate tax-free, and states set their own gift tax thresholds that are impacted by where the deceased resided and heirs live. As you plan for who pays taxes when your assets pass to your heirs, work with your financial and tax professionals to determine which tax-advantaged strategies are appropriate for your situation.
  • Generation-skipping tax- The generation-skipping transfer tax is a federal tax that results when a property is transferred by gift or inheritance to a beneficiary who is at least 37½ years younger than the donor. Consult your tax professional on how transferring assets to a grandchild or other heir may impact their tax situation if inheriting from you.

3. Legacy planning

Legacy planning is leaving a legacy for others, which often includes protecting others when you pass on your values and financial dreams. Some individuals give their wealth to benefit their children and their children's children. If the wealth is great enough, endowments may be created to help many people over time. Legacy wealth transfer may become complex due to the types of assets you own, changes in tax legislation, economics, and political environments. You must consult financial, tax, and legal professionals to pass assets without economic consequences to heirs.

4. Succession planning

Succession planning generally involves trusts, private trust companies, and foundations offered in various jurisdictions to ensure your wealth transfers to the next generation as efficiently as possible. There are two types of succession planning for individuals to consider:

  • Generational succession planning- Planning to help ensure your wealth passes to the next generation and is comprehensively managed and passed to the next generation.
  • Business succession planning- If you own a business, business succession planning may cover selling your business and retiring, selling but staying on part-time, and passing ownership to another family member or key employee.

Here are some other things you may want to consider in your succession planning:

  • Investment strategies
  • Involving the successors
  • Clarify your values and purpose
  • Work with professionals who will help monitor your situation across generations.

Estate planning can be challenging for some due to the complexities of their situation but manageable when done over time. Now is a great time to use this planning guide as you work with your financial professional to plan for the start of the New Year.

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by Fresh Finance.

LPL Tracking #1-05326016




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The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.


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